Outlook: Drug consolidation

WITH PFIZER's $80bn bid for Warner Lambert, we seem to be entering the final end game of pharmaceutical industry consolidation. Sir Richard Sykes, chairman of Glaxo Wellcome, has long held the view that the industry will eventually boil down to five or six research and development powerhouses, with market shares of perhaps as high as 10 per cent each for the global market in prescribed drugs. Underneath them will be a larger number of smaller, more specialist bio-tech and drug discovery companies.

Pfizer's bid for Warner Lambert again holds out the prospect of creating one of those powerhouses, for the first time since the failed merger talks between Glaxo Wellcome and SmithKline Beecham. Bizarrely, it is again a bid for the anaemic American Home Products which has proved the catalyst. Pfizer made its offer only after Warner Lambert bid for AHP. Likewise, Sir Richard Sykes made his ultimately fruitless move on SmithKline Beecham only after SmithKline had agreed a merger with AHP.

If Pfizer pulls it off, Sir Richard will again be knocking on SmithKline's door, if indeed he hasn't already done so. Pfizer and Warner Lambert are both fast growing companies and together they would account for some 8 per cent of worldwide spending on pharmaceutical development. This would give a potentially huge lead over the nearest rivals in drug discovery, including SmithKline Beecham and Glaxo Wellcome. Events seem to be driving these two latter companies together with increasing force, personality clashes notwithstanding.